Our refining and chemicals facilities in Saudi Arabia — some wholly owned, some ventures with global companies — increase opportunities for domestic conversion industries, manufacturers, and service providers, adding value to the Kingdom’s resource base.

25

downstream: adding value through integration

Continuing our journey to become the world’s leading integrated energy and chemicals company, in 2016 we created additional value from our resource base by progressing a suite of major downstream projects.

In refining, we made steady progress on our wholly owned Jazan Refinery, which includes an integrated aromatics complex, in the Kingdom’s southwest. In chemicals, we started up the mixed feed steam cracker with the capacity to crack 85 million scfd of

ethane at Sadara, our joint venture with The Dow Chemical Company in Jubail Industrial City. With our partner Sumitomo of Japan, we neared completion of an expansion at Petro Rabigh, our integrated refining and chemicals complex on the Red Sea coast. And we launched Arlanxeo, a specialty chemicals joint venture headquartered in the Netherlands.

Unlocking the greater potential value inherent in hydrocarbon resources lies at the heart of our downstream strategy. We plan to capture synergies by integrating at both the operational and geographical level — connecting oil and gas supply, refining, chemicals, and base oils in regions of high growth potential. Our integrated business model enables us to attain higher value from every hydrocarbon molecule that we produce and grow our global market share.

With a diversified, integrated, and robust business portfolio, our supply, trading, and marketing model will mitigate oil price volatility, generate additional revenues, and expand opportunities for conversion industries, local manufacturers, and service providers — all of which drive job growth and value creation.

26 Annual Review 2016

In-Kingdom downstream: stimulating growth Saudi Arabia’s endowment of oil and gas, our expanding network of refining and chemicals facilities integrated with industrial parks, and geographic proximity to major markets in Europe and Asia all combine to create favorable conditions for investment, growth, and even greater demand.

In 2016, we safely and reliably supplied the country’s transportation sector with the refined products and fuels needed to keep the Kingdom moving, provided fuel and feedstock to the Kingdom’s power sector, made significant progress on our integrated refining and chemicals projects, and advanced the development of a base oils business. We also continued to explore enhanced integration opportunities within our refining network while focusing on our performance to boost operating efficiency.

We are committed to raising our global refining capacity.

Construction of our 400,000 bpd Jazan Refinery reached 55% completion. The overall project includes a marine terminal and an integrated gasification combined cycle power plant with the capacity to generate 3.7 gigawatts of electricity. Pre-commissioning activities for the Jazan complex are scheduled to begin in mid-2018, following completion of the marine terminal.

Sadara: unlocking valueWorldwide, the chemicals industry is a $4 trillion business, but the Gulf Cooperation Council’s (GCC) share of the global market for specialty chemicals, for example, is less than 2%. We therefore see significant opportunities to grow our downstream products portfolio, creating sustainable value for our partners, our customers, and the Kingdom.

Our Sadara joint venture, with the capacity to produce 3 million tons of performance plastics and high-value chemicals per year, was conceived to meet growing demand in the region and in Asia.

To learn more about our research in downstream technology, see pg. 38

27downstream: adding value through integration

In 2016, Sadara marked a historic landmark with the startup of its mixed feed steam cracker, making it the first chemicals facility in the GCC countries to crack naphtha. The cracker, which breaks ethane and naphtha to form new molecules, including ethylene and propylene, enables the production of a diversified range of plastics and chemical products designed to meet the rigorous standards of sectors such as advanced packaging, construction, electronics, furniture, and the automobile industry.

PlasChem and PlusTech Parks: multiplying valueThe potential to grow our in-Kingdom employment is especially strong in the chemicals sector. Currently, the regional chemicals industry accounts for less than 1% of the global number of jobs in the sector and related industries. Our expansion into the industry will raise that percentage. For example, adjacent to Sadara is the PlasChem Value Park. Expected to create 1,500 direct jobs and generate opportunities for thousands more indirect jobs, the park has attracted some of the world’s largest chemical and oil services investors. Our support includes

investing in an ethylene oxide and propylene oxide pipeline, and coordinating our efforts with the PlasChem Value Park team and the Royal Commission for Jubail and Yanbu’ to attract investors and future customers.

The Petro Rabigh PlusTech Park, integrated with Petro Rabigh, is expected to generate more than 2,000 jobs and attract private sector investment of over $1 billion. Given the park's potential to attract new customers, we contributed 50% of the park’s development costs and currently own a 50% stake in its infrastructure and assets. Our main role is to promote and market PlusTech Park to attract downstream conversion industries that will consume our fuel and feedstocks. So far, 30 local and international plastics converters have signed agreements to operate in the park, 14 of which have commenced production.

We also neared completion of the Petro Rabigh Phase II project to expand its cracking facility to crack an additional 30 million scfd of ethane and add an aromatics complex to produce new differentiated products. The full operation of the cracking facility was achieved in 2016, and the remaining assets are scheduled to start up in mid-2017.

Khalid Al-Faifi grew up in the mountains of Jazan and now works as a mechanical engineer at our Jazan Refinery, under construction in the Kingdom’s southwest. Al-Faifi, and thousands more like him, are helping transform the area into a magnet for opportunity and investment.

28 Annual Review 2016

By partnering with global energy companies in ventures such as SATORP in Jubail, S-Oil in the Republic of Korea, and YASREF in Yanbu’, we maximize the value of the Kingdom’s hydrocarbon resources while producing critical feedstock for industry and essential fuels that meet the needs of consumers around the world.

29downstream: adding value through integration

Global downstream: expanding horizons Our partnerships in refining and marketing ventures in China, Japan, South Korea, and the United States enable us to traverse the length of the value chain from wellhead to consumer, adding value to our resources at every step. In 2016, we continued to pursue and evaluate international opportunities to expand our refining and chemicals capability for greater downstream integration to propel additional value creation.

• In South Korea, we hold a majority equity interest in S-Oil, one of the country’s leading refiners. Two projects are underway to enhance its refinery’s competitiveness, create a more diversified portfolio, and improve profitability. The first project involves upgrading low-value residue to high-value olefin and gasoline products. The second project involves new facilities to produce polypropylene and propylene oxide, and recover ethylene.

• In Indonesia, we have been selected as the strategic partner for the Refinery Development Master Plan Project of Pertamina, the national oil company. In 2016, we signed a nonbinding Joint Venture Development Agreement to enable further progress for the joint ownership, upgrade, and operation of Pertamina’s Cilacap Refinery in Central Java. Under the agreement, the refinery’s capacity will be expanded to 400,000 bpd and designed to process Arabian crude oil to produce refined products that meet Euro V specifications, basic petrochemicals, and Group II base oil for lubricants. Saudi Aramco will own a 45% interest of the venture. Basic engineering design work was completed in early 2017.

In addition to expansion in Asia, we also progressed integration in the United States and Europe:

• In the United States, a nonbinding Letter of Intent was signed by our Houston-based indirect subsidiary, Saudi Refining Inc., and an affiliate of Shell Oil to end the Motiva Enterprises LLC refining and marketing joint venture formed by the parties in 1998 (“Motiva”), and to divide the assets of Motiva between them. Subject to the

completion of definitive agreements and the receipt of regulatory approvals of the definitive agreements, Saudi Refining Inc. and its affiliate, Aramco Financial Services Company, will own 100% of Motiva and the assets retained by Motiva, including full ownership of the Motiva Refinery in Port Arthur, Texas and certain distribution terminals. The definitive agreements also include an exclusive license to use the Shell brand to sell certain products across much of Texas and the Southeast.

• In the Netherlands, we officially launched Arlanxeo, our joint venture with German specialty chemicals company LANXESS, a milestone on our journey to increase our participation in the chemicals sector. Arlanxeo is a world leader in the development, production, marketing, sale, and distribution of synthetic rubber and elastomers used in the global tire industry, auto parts manufacturing, construction, and oil and gas industries. The joint venture helps unlock the full economic potential of the Kingdom’s hydrocarbon resources, and potentially enables opportunities for further economic diversification and job creation.

Growing sales and marketingExpanded sales and marketing activities are key components of our strategy to strengthen integration across our downstream business and create additional value while diversifying risk. Guided by this approach, we registered eight new customers in 2016 and explored sales opportunities in the Baltics, Africa, Australia, and New Zealand. We also renewed our agreement for the Okinawa storage facility to support supply and distribution in Asia and are working to expand storage capacity by 2 million barrels, to 8.3 million barrels, by mid-2017.

In 2016, we signed key business principles with the Jadwa Industrial Investment Group and LUBEREF, our affiliate that operates two base oil refineries in Jiddah and Yanbu’ on the Kingdom’s Red Sea coast, for the right to lift and market the base oil produced at LUBEREF. Base oils are used to create lubricants for automotive, industrial, and marine applications.

Saudi Aramco Total Refining & Petrochemical Company

Yanbu Aramco Sinopec Refining Company Ltd.

S-Oil Corporation

30 Annual Review 2016

We plan to integrate base oil producing affiliates and establish global base oil product slates under the Saudi Aramco brand for Groups I, II, and III, with the capacity to produce 4.7 million tons per year, representing 14% of global base oil demand. In late 2016, our sales and marketing subsidiary, Aramco Trading Company (ATC), began volume exports of Group I base oil under the new brand name aramcoDURA®.

In addition to commencing exports of aramcoDURA®, ATC celebrated five years of successful operations and remained focused on creating more value from trading operations and maintaining reliability and profitability from our refined products portfolio. ATC pursued efficiency gains by optimizing freight contracts, hiring a new lead logistics provider, and increasing the number of local and international hubs to offer greater storage options and shipping flexibility.

Meeting our customers’ needs in the KingdomBy optimizing our supply chain and balancing the utilization of our assets, we seek to meet our in-Kingdom customers’ needs safely, efficiently, and reliably. In pursuit of these goals, in 2016 we continued work to upgrade our distribution system.

To enhance supply reliability, we completed a project to increase the capacity of the Riyadh-Qassim pipeline from 125,000 to 160,000 bpd, boosting the reliability of refined product supply to this central region.

Our project to re-commission the Yanbu’ South Terminal and integrate it with the Yanbu’ Crude Oil Terminal progressed in 2016, with construction reaching 64% completion. Integrating the two terminals creates greater operational agility and

New gas plants such as Wasit are key components of the expansion of the Master Gas System. Growing the capacity of the Master Gas System to deliver more gas safely and reliably enables new opportunities.

2016 exports by region: crude oil

Asia

NW Europe

Mediterranean

U.S.

Other

66.7 5.9

5.4

15.8

6.2

31downstream: adding value through integration

2016 exports by region: refined products

Asia

NW Europe

Mediterranean

Other

bolsters our downstream network integrity to meet demand in Saudi Arabia. The South Terminal will facilitate crude oil deliveries to our Jiddah and Jazan refineries and to our YASREF joint venture refinery while maintaining crude oil export capability.

By expanding our Master Gas System, we are enabling the growth of the high-demand utility and industrial sectors in the Kingdom’s Central and Western regions.The first phase of the project to expand our Master Gas System is designed to

increase capacity from 8.6 to 9.6 billion scfd and deliver gas to King Abdullah Economic City — a grassroots industrial and commercial city 120 km north of Jiddah — and the Rabigh area. Construction of the first phase was 72% complete at year-end, and engineering and procurement for the second phase, which will raise capacity to 12.5 billion scfd, were 73% and 38% complete, respectively. The additional volumes of fuel and feedstock will help our customers diversify and create jobs.

Primed for growthDriven by our strategy to integrate across the value chain, our achievements in the downstream sector continued to build strength and resilience into our business model — positioning us for greater growth.

32.5

46.1

9.511.9